Update: Brexit Insights Brexit Referendum: Why Chemicals and Pharma Will Be Hit Hardest
The chemical industry could be the first to feel the immediate impact of Britain’s possible vote on exiting the EU: recent studies show that the branch could be affected by a seven billion pounds loss in exports, making it the hardest hit of all British industries…
London, United Kingdom – If Britain leaves the EU without establishing a follow-up Free-Trade agreement, UK chemicals exports could drop by £7 billion overnight, figures by trade credit insurance company Euler Hermes indicate. Other export-focused branches such as machinery and equipment (£3.5bn loss) and the automotive industry (£3bn loss) would follow.
“The chemicals industry is one of the most important exporting sectors in the UK, with £55bn of goods sent abroad each year,” said Ana Boata, European economist at Euler Hermes. “But British companies are already under immense pressure to become more competitive against high growth markets in the US and Asia, while also battling higher R&D costs and a strong pound in recent years. With over half of the chemical industry’s exports heading to the EU, any decision to break away from continental trading partners would have knock-on effects on the supply chain and put jobs at risk. The figures emphasise the importance of negotiations to secure an FTA in the event of Britain leaving the EU.”
Possible Scenarios: From Minus 2.5 to Minus 7 Billion...
If Britain could negotiate a new Free Trade Agreeement FTA following a possible Brexit, UK chemical companies could still see a drop of up to £2.5bn in exports, while machinery and equipment and automotive industries would each witness a £1.1bn contraction.
Reflecting on these results, Steve Elliott Chief Executive of British Chemical Industries Association CIA said, “Our survey does underline the criticality of the European Union market place for UK chemical and pharmaceutical jobs, investment and growth. Half a million people across the country depend on our sector for employment and we are also UK manufacturing’s largest net export earner – impressive credentials that would be brought into immediate question if we withdrew from the European Union.”
Uncertainty Makes Matters Worse
Senior figures from the sector have endorsed this message. Richard John Carter, Managing Director, BASF UK & Ireland, said “There is a high degree of uncertainty attached to Brexit. We don't and cannot know the terms that will be agreed but the political uncertainty will cause volatility in markets and add costs to trade and investment. It will create insecurity for our EU workers in the UK and UK workers in the EU. It will mean a huge amount of time and energy is taken up that could be better used such as completing the Single Market or improving international trade deals that create jobs and growth in Britain”.